Kondratiev Curve

  THE US ECONOMY & THE KONDRATIEV ECONOMIC SEASONS



The US government is fast approaching its debt ceiling, which means a size of debt beyond which it can borrow no more without the approval of Congress. Theoretically it won’t be able to pay its bills! So what is Congress doing about resolving the problem? Not much, just a lot of talking and posturing for the media with no progress.

And what is the president doing? President Obama is insisting on tax increases as an ingredient of any deal to raise the debt limit. He wants to increase NOT decrease spending. He is saying things differently now than what he said a couple of years ago about taxing during a recession. Back then he said taxes were not the way to go. Now he says they are ok. Are we out of the Great Recession? I think not. He speaks with forked tongue for political expediency to satisfy the left, not the American people.

The horrible truth is that the USA is caught in a cyclical downward economic vortex caused by many governmental and personal excesses. Both parties are guilty of the spending excesses of the nation and the huge debts and obligations but it is on Obama’s watch to fix. Simply, the nation, with an aggregate debt of $14.498 TRILLION and unfunded liabilities of $114.662 TRILLION and its citizens, with aggregate debts of $16.053 TRILLION have spent too much for too long (the good times) and taken on unsustainable debt loads and unfunded liabilities which they cannot repay or afford in the foreseeable future.


Unfortunately these 3 staggering sums come at a time in history when the economic cycle is in a normal down trend. This is best described as the Kondratiev Winter. (See figure below) Not to be outdone, Europe is there too, not just the PIIGS but the whole of Europe. China is on its way. Latin America is a continental basket case. Never mind the BRIC. Russia doesn’t belong in it.


My take on the debt problem is basic. ~$0.42 of every USD spent by the government is borrowed. The solution: cut spending across the board by 42%. Tough medicine but it may not be too far off the mark.


So, why do I write this? I write this because these financial problems have an impact on your life and that of your family and friends. Below is a message I gave to my children which summarizes where we are and where I think we are heading. They are heeding the advice. I thought you might find this interesting in light of the present problematic situation in which the world finds itself.


“The Kondratiev wave or curve (Check the link below) as it is sometimes called is a theorem I studied at university. There is a great deal of truth to it however the cycle can vary from 50-70 years and not strictly 50 years as illustrated in the graph. I believe that we are currently in the early “D” phase of the curve which is sometimes called the Kondratiev Winter. E= Spring, P=Summer, R=Autumn. Those are the four seasons. I think we have 12-15 years left in the “winter” phase we are now in. Conduct your lives accordingly. No debt, no payments. Differentiate between NEED and WANT in the things you purchase. Postpone wants, study each need. Be disciplined and frugal. This will get you through the winter. Be wary of fiat currencies and buy gold or silver (http://www.goldmoney.com/) as a means to protect your wealth. The US$$$ and € are dropping like stones and your buying power is greatly diminishing with them and will erode more as inflation and possibly hyperinflation sets in during the next few years.


It is a time to be very cautious with your hard earned money and protect your wealth.”



http://en.wikipedia.org/wiki/Kondratiev_wave